Public hearing set on Charles City broadband utility financing ‘not to exceed’ $22 million

By Bob Steenson, bsteenson@charlescitypress.com

At least 16 companies have shown interest in constructing Charles City’s new fiber optics broadband system, a fact that has members of the city’s telecommunications utility hopeful they will see competitive prices when bids are opened June 2.

As part of the process to pay for that construction, the utility board set a public hearing for 4 p.m. Tuesday, June 9, to receive input on the board’s proposal to issue up to $22 million in revenue bonds to pay for the system.

Revenue bonds are paid by the revenue the utility receives for services sold, and are not an obligation against property taxes collected by the city. The plan is that only the people who choose to buy the services would pay for the system.

Financial consultants to the board said the intent is to not have to spend anywhere near that limit.

Michael Maloney, senior vice president with D.A. Davidson & Co. of Des Moines, said the hope is that the system will be built and have initial operating capital for a projected price of about $18 million.

The $22 million figure gives the utility board “maximum flexibility,” he said.

“Just to put your mind at ease, we wrapped up Pella’s project here today, and on that project for all their financing needs we used a not-to-exceed amount of $26 million,” Maloney said at the telecommunications utility meeting Tuesday, referring to a broadband utility project in Pella that he said was relatively similar to the project Charles City is planning.

“We finished all the financing today and the total was right at $21 million,” he said. “It was a $5 million reduction from what we held the hearing on to what the ultimate financing would be.

“I can’t guarantee that’s what’s going to be the performance here, but that’s the intent – that it’s gonna be well under this value,” Maloney said.

Dick Herbrechtsmeyer, a city utility board member, emphasized that it’s an “up to” number, but the board is not committing to doing anything other than telling the public it could go up to that number.

The motion on a resolution setting the public hearing June 9 on the figure not to exceed $22 million passed by a vote of 5-0.

The main part of construction on the project would be installing about 66½ miles of underground fiber optic cables, service area cabinets and other connections to make the service available to every home and business in the city limits.

In another money matter, members of the board and the utility’s consultants spent time talking about the potential salary for the utility general manager, who the board hopes to hire by the end of June.

Eric Lampland, president of Lookout Point Communications of St. Paul, Minnesota, presented a possible organizational chart for the telecom utility employees which showed a general manager at a possible salary of $130,000.

Charles City City Administrator Steve Diers said they had talked about a general manager salary range of $125,000 to $140,000.

But utility board Chairwoman Cheryl Erb said the $130,000 figure “seems a little high,” and would be questioned by some of the city’s residents.
Board member Lydia Johnson said she was comfortable at that figure, and board member Jeff Marty said, “If we want some good talent we’re going to have to pay them what they’re worth.”

Board member Danny Wilson Jr. said the number “didn’t surprise me,” but he acknowledged it might cause “some mumbling in the city.”

Erb said she had checked with other cities and many of their utility managers — even in cities where there was more than one utility — were paid less than that.

Lampland said they were looking for someone with skills that “are a little hard to find.”

The position is being designed as more than just a business manager, but someone with technical knowledge, Lampland said.

“In the next 10 years, the impact in providing services to your customers is well beyond what you think of today as triple play,” he said, referring to the package of internet, television and telephone that the utility plans to offer as options.

“You need somebody who understands how to move that vision forward and be prepared for what’s coming and to be able to respond to what’s coming, and hopefully to have some connections with the industry so he or she can go out and have discussions with people in a very real way to support the way he’s guiding the organization,” Lampland said.
“I still think it’s a little high,” Erb said.

The group agreed to gather more comparative data and resume the discussion at the next meeting.

Also at the meeting, the board again looked at the prospective timeline for the project, which calls for opening construction bids and making a final “go/no go” decision on the project by the second week in June, construction beginning in early July and completed by the end of May 2021, and service to many areas in the community available in April 2021.